HELP! New investor bought a lemon in SoCal - seeking guidance
Hey BP!
I am currently FHA house hacking a property that I purchased about a year ago just south of USC which, unbeknownst to me, had illegal construction, which caused a host of problems, in addition to other issues. None of this was disclosed to me at the time of purchase and there is reason for me to believe there may have been some funny business. After speaking with friends, family and mentors, I was strongly suggested to seek legal counsel in regards to recovering damages, but am trying to avoid a costly and drawn out litigation which may prove more trouble than it's worth.
I'm currently in talks about having my case reviewed and have gotten several quotes from architects for building plans, but the timeline is too uncertain and I am accruing steep holding costs in addition to any fees/plans/services I have to pay, etc. My biggest hurdle has been in obtaining a certificate of occupancy, which is a lengthier and more expensive process than I (and my wallet) had hoped. To further complicate things, I am in an RSO zone and have been holding off on getting tenants in the meantime to avoid paying relocation fees.
The silver lining is that the supposed DUPLEX that I bought is legally recorded as a TRIPLEX in a rapidly gentrifying area and has already gained equity, but that type of project falls outside my scope of rehab capabilities and my finances are stretched pretty tight as it is. I've called around and from my understanding, borrowing is essentially out of the question, so I'm on a deadline to get things on track or risk foreclosure...
Ideally, I'd like to keep the property and salvage my credit but am exploring other options to try and stay ahead of everything. In a nutshell, I'm out of money and short on time, but my assumption is that losing the property would destroy my credit and make me a leper in the banking world.
Should I:
Sell ---As is or with duplex/triplex plans?
Salvage ---Find a financial partner or hang on and ride out the process?
Chapter 11 ---Would anyone even touch this?
Or... cut my losses, consider it my RE hard knocks education and start from scratch?
Any ideas? I'm open to anything at this point.